Information Data Sharing Policy May 2017 · to subsection 10(1) of the Municipal Property...

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INFORMATIONANDDATASHARINGPOLICY

Industrial,CommercialandMulti-ResidentialProperties

May2017

©MunicipalPropertyAssessmentCorporation2017AllrightsreservedUpdatedMay2017 2

May9,2017

InaccordancewiththedirectionissuedbytheMinisterofFinanceonApril18,2015,pursuanttosubsection10(1)oftheMunicipalPropertyAssessmentCorporationAct,theMunicipalPropertyAssessmentCorporation(MPAC)haspublishedtheInformationandDataSharingPolicythatappliestoallindustrial,commercialandmulti-residentialproperties.

ThisPolicyisintendedtoprovideclarityandtransparencyastothetypeofinformationanddatathatassessedpersons,theirrepresentatives,municipalitiesandotherpartiesneedtoprovidetoMPACforanypurposerelatingtotheassessmentofland.

MPAC’sGuidelinesfortheReleaseofAssessmentDataPolicyforResidentialPropertiesisavailableonMPAC’swebsite.

CarmeloLipsi,B.A.,M.I.M.AVice-PresidentandChiefOperatingOfficer

DocumentControl

Theelectronicversionofthisdocumentisrecognizedastheonlyvalidversion.

VersionNumber VersionDate SummaryofChanges Original June2015 01 May2017 UpdatesmadetoreflectMPAC’srevised

GuidelinesfortheReleaseofAssessmentData(GRAD)Policy

Acknowledgements

AspartofthepreparationoftheInformationandDataSharingPolicy,MPACconsultedwithaffectedtaxpayers,municipalities,andrepresentatives.MPACengagedtheInternationalPropertyTaxInstituteasanindependentfacilitatortoundertakeconsultationsessionswhichincludedthefollowingindustries:

• Pulp&PaperMills;• SawMills;• Value-AddedWoodManufacturingPlants;• SteelManufacturingPlants;• AutomotiveAssemblyPlants;• AutomotivePartsManufacturingPlants;• Mining;• OilRefineries;• ChemicalManufacturing;• PharmaceuticalManufacturing;• FoodManufacturing;• Aerospace.

MPACwouldliketoacknowledgeandthankthefollowingpartieswhoparticipatedintheconsultationprocess(September2014–March2015).Questionsabouttheconsultationprocesscanbedirectedtoconsultation@mpac.ca.

CityofHamilton EssarSteelAlgomaInc. DuCharme,McMillen&CityofSaultSte.Marie ArcelorMittal Associates,Inc.HaldimandCounty MagnaInternationalInc. NixonFleet&PooleLLPCityofOttawa GeneralMotorsofCanadaLimited AltusGroupLimitedTheCorporationoftheCityofNorth HondaCanadaInc. EquitableValueInc.Bay CanadianVehicleManufacturers’ AECPropertyTaxSolutionsCityofBrampton Association PrestigePropertyTaxSpecialistsCityofSt.Catharines FordMotorCompanyofCanada MunicipalTaxEquity(MTE)CorporationoftheCityofSt.Thomas Limited ConsultantsInc.CityofGuelph FiatChryslerAutomobiles Cushman&WakefieldPropertyCityofOshawa ResoluteForestProducts TaxServicesCityofVaughan Domtar RyanTownshipofSouthwestOxford Tembec BorealAppraisalServicesCityofCambridge AVTerraceBayInc. MunicipalTaxAdvisoryGroupTownofIngersoll MohawkGarnetInc. WalkerWestLongoTownofMilton GoldcorpInc. JamesPetrinPropertyTownofOakville PrimeroMiningCorp. AssessmentServicesCityofGreaterSudbury ValeCanadaLimited CityofThunderBay GlencoreTownofEspanola LakeshoreGoldCorp.TownshipofDubreuilville SuncorCityofThorold ImperialCityofMississauga NOVAChemicalsCorp.

TownshipofJames/ElkLake ShellCanadaCityofSarnia PurduePharmaCanadaCityofTorontoTownofWhitchurch-StouffvilleTownofWhitby

Purpose

ThepurposeoftheInformationandDataSharingPolicyistoidentifyandclarifyinformationtheMunicipalPropertyAssessmentCorporation(MPAC)requiresfrompropertyownersandmunicipalitiesinordertodetermineaccurateCurrentValueAssessments(CVA)forindustrial,commercialandmulti-residentialproperties.Inaddition,thepolicywillexplainhowvaluatorsanalyzecollecteddataanddrawvaluationconclusionsfromthisanalysisaswellastesttheseconclusionsagainstappropriatemarketdata.

ThepolicywillalsoprovideinformationonhowMPACsafeguardsproprietaryinformation.

TimelydeliveryofpropertyinformationisnecessaryfortheanalysisandproductionofaccurateCVAs.

Introduction

MPACisresponsibleforadministeringauniformassessmentsystembasedonCurrentValueAssessment(CVA)inaccordancewiththelegislationsetbytheOntariogovernment.

TherearefourmaincomponentsinOntario'spropertyassessmentandtaxationsystem.Eachplaysanimportantrole.

1. TheProvincialGovernmentpasseslegislation,setspropertytaxpoliciesandsetseducationtaxrates.

2. MPACestablishesCurrentValueAssessmentsandclassificationsforallpropertiesinOntario.

3. Municipalitiesdeterminetheirrevenuerequirements,setmunicipaltaxratesandcollectpropertytaxes.

4. TheAssessmentReviewBoard,anindependenttribunalthatispartoftheEnvironmentandLandTribunalsOntariocluster,whichreportstotheOntarioMinistryoftheAttorneyGeneral,hearspropertyassessmentandtaxappeals.

ThemainlegislationgoverningtheassessmentofpropertiesinOntarioforpropertytaxpurposesiscontainedintheAssessmentAct1990(asamended).

TheActcontainsimportantdefinitions,includingwhatpropertyistaxableandhowitshouldbevalued.

TheActstatesthatpropertymustbeassessedatits"currentvalue"whichmeans,inrelationtoland,

"…theamountofmoneythefeesimple,ifunencumbered,wouldrealizeifsoldatarm'slengthbyawillingsellertoawillingbuyer.”

Inthiscontext,CVAequatestothenotionof“marketvalue.”

OtherrelevantlegislationwillbereferredtoasnecessaryinthisGuide.

LegislativeAuthoritytoCollectPropertyData

Section19(1)oftheAssessmentActdirectsMPACtoassesslandbasedonitscurrentvalue.

Section10oftheAssessmentActprovidesMPACwiththerightofaccesstoalllandandbuildingsforthepurposeofmakingaproperassessment,providedthat:

• TheMPACpropertyinspectorproducesproperidentification.

• Theinspectionisconductedatareasonabletime.

• Theinspectionorrequestforinformationisforthepurposeofdeterminingtheassessmentoftheproperty.

Sections10and11oftheAssessmentAct(excerptsbelow)requireapropertyownertoprovideMPACwithallrequestedinformationrelatingtotheassessmentofthatproperty,eitheratthetimeoftheinspection,orbyrespondingtoaletter.Thisinformationisrequiredtobereturnedwithinareasonabletime.

AccuratedataisnecessarytoproduceaccurateCVAs.MPACpropertydataisupdatedregularlyusingavarietyofsources,including:

• landtitledocumentsregisteredatOntarioLandRegistryOffices

• digitalimagery

• buildingpermitsissuedbylocalmunicipalities

• discussionsandcorrespondencewithpropertyowners

• on-sitepropertyinspections

• questionnaires

Rightofaccess

10.(1)Apersonauthorizedbytheassessmentcorporation,uponproducingproperidentification,shallatallreasonabletimesanduponreasonablerequestbegivenfreeaccesstoalllandandtoallpartsofeverybuilding,structure,machineryandfixtureerectedorplacedupon,in,over,underoraffixedtotheland,forthepurposeofmakingaproperassessmentthereof.R.S.O.1990,c.A.31,s.10(1);1997,c.5,s.6(1);2006,c.33,Sched.A,s.10.

Information

(2)Everyadultpersonpresentonlandwhenanypersonreferredtoinsubsection(1)visitsthelandintheperformanceofhisorherdutiesshalluponrequestgivetothepersonalltheinformationinhisorherknowledgethatwillassistthepersontomakeaproperassessmentofthelandandeverybuilding,structure,machineryandfixtureerectedorplacedupon,in,over,underoraffixedtothelandandtoobtaintheinformationheorsherequireswithrespecttoanypersonwhosenameheorsheisrequiredtoenterontheassessmentrollorconcerningwhomheorsheisrequiredtoobtainanyinformationforthepurposeoftheenumerationrequiredbysection15.R.S.O.1990,c.A.31,s.10(2);1997,c.5,s.6(2).

Requestforinformation

11.(1)Foranypurposerelatingtotheassessmentofland,theassessmentcorporationmay,bylettersentbymail,servedpersonallyordeliveredbycourier,requireapersonwhoisormaybeassessedinrespectofthelandtoprovideanyinformationorproduceanydocumentrelatingtotheassessmentoflandwithinsuchreasonabletimeasissetoutintheletter.1997,c.5,s.7;2006,c.33,Sched.A,s.11(1).

Returnofinformation

(2)Apersonwhoreceivesaletterundersubsection(1)shall,withinthetimesetoutintheletter,providetotheassessmentcorporationalltheinformationrequiredthatiswithintheperson’sknowledgeandproduceallthedocumentsrequiredthatarewithintheperson’spossessionorcontrol.1997,c.5,s.7;2006,c.33,Sched.A,s.11(2).

CompliancetoMPAC’sDataCollectionRequests

Pursuanttos.40(18)oftheAssessmentAct,incaseswherepropertyownersfailtorespondfullytoMPAC’srequests,theAssessmentReviewBoardhasauthoritytoorderthattheburden

ofproofastothecorrectnessofthecurrentvalueofthelandtorestwiththeappellant,notMPAC,intheeventofanyappealsfiledwithrespecttotheassessment.

Same,non-co-operation

S.40(18)Despitesubsection(17),theburdenofproofastothecorrectnessofthecurrentvalueofthelandrestswiththeappellantwhereheorshefailsorrefuses,

(a)togivetheassessmentcorporationreasonableopportunitytoinspectthepropertyundersection10;or

(b)tocomplywitharequestforinformationanddocumentationundersection11.2008,c.7,Sched.A,s.11.

Additionally,MPACmaypursueapplicationoftheenforcementprovisionsfoundunders.13oftheAssessmentAct,forinstanceswhererequestsforinformationarenotsatisfied.

Offencefornotfurnishinginformation

13.(1)Everypersonwho,havingbeenrequiredtofurnishinformationundersection10or11makesdefaultindeliveringorfurnishingit,everypersonwhofailstoprovideinformationasrequiredundersection16.1or16.2andanycorporationthatmakesdefaultindeliveringthestatementornoticementionedinsection25or30,isguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$1,000andanadditionalfineof$100foreachdayduringwhichdefaultcontinues.R.S.O.1990,c.A.31,s.13(1);1997,c.5,s.8;2006,c.34,Sched.D,s.94(5).

Forfalsestatement

(2)Everypersonwhoknowinglystatesanythingfalseinanysuchstatementorinfurnishingtheinformationisguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(2).

(3)Everypersonwhohasmade,orparticipatedin,assentedtooracquiescedinthemakingof,afalseordeceptivestatementinanyapplicationorsupportingdocumentrequiredtodetermineeligibilityforexemptionfromtaxationunderparagraph22ofsubsection3(1)isguiltyofanoffenceandonconvictionisliabletoafineoftheamount

ofthetaxthat,hadthetruefactsbeenstated,wouldhavebeenpayable,plusanamountofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(3).

Forobstructingtheassessmentcorporation,etc.

(4)Everypersonwhowilfullyobstructsorinterfereswithanypersonreferredtoinsubsection10(1)intheperformanceofanyofhisorherdutiesortheexerciseofhisorherrights,powersandprivilegesunderthisActisguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(4).

MPAC’sCommitmenttotheProtectionofPersonalPrivacy

MPACiscommittedtotheprotectionofprivacybymanagingthecollection,use,disclosure,retentionanddisposalofpersonalandnon-personalinformationinamannerthatcomplieswiththerequirementsoftheMunicipalFreedomofInformationandProtectionofPrivacyAct(MFIPPA),theAssessmentAct,theInformationandPrivacyCommissioner/Ontario(IPC)andallotherrelevantlegislation,regulationsandtribunal/judicialrulings.

“Personalinformation”asdefinedbytheMunicipalFreedomofInformationandProtectionofPrivacyActmeansrecordedinformationaboutanidentifiableindividualandincludes,butisnotlimitedto,aperson'sname,address,telephonenumber,religion,age,sex,maritalorfamilystatusorfinancialtransactionsinvolvingtheindividual.

MPACmay,fromtimetotime,releaseaggregateinformationintheformofdemographicstudiesorotherextractsconstructedfromtheanalysisofpersonalinformation.However,theseproductsneitheridentifyindividualsnorenableotherstoextrapolatetheiridentities.Suchrequestsforinformation,oranymattersthatrequireclarificationorlegislativeinterpretation,areinvestigatedbyMPAC’sManagerofFreedomofInformationandRecordsManagement,whowillensureMPACisincompliancewiththeapplicablelegislation.

Exceptaspermitted/requiredbylaw,MPACdoesnotreleaseincomeandexpenseinformation,personalinformation,oranyotherdatathatwouldenabletheidentificationofindividuals.

Ifafteranappealhasbeenfiled,MPACreceivesarequestforthereleaseofactualincomeandexpenseinformation,orothersensitivecommercialproprietaryinformation,theusualpracticeistorequirethepersonseekingtheinformationtobringamotionbeforetheAssessmentReviewBoard(ARB),withnoticetothethirdparties,requestingthattheARBorderproductionoftherequestedinformation.ThereleaseofsuchinformationisatthediscretionoftheARB.

Exception

S.53(2)Thissectiondoesnotpreventdisclosureofthatinformation,

(a)totheassessmentcorporationoranyauthorizedemployeeofthecorporation;or

(b)byanypersonbeingexaminedasawitnessinanassessmentappealorinaproceedingincourtinvolvinganassessmentmatter.1996,c.4,s.43;1997,c.43,Sched.G,s.18(34).

AccesstoInformation

EverypropertyownerhastherighttoknowandaccesstheinformationMPAChasonfilefortheirpropertyaswellasreceiveinformationandassistancetohelpthemunderstandtheirassessment.PropertyownerscanaccessinformationabouttheirpropertyandotherpropertiesfreeofchargefromMPAC.

Thisinformationincludes:

• thephysicalcharacteristicsofaproperty

• itslocation

• classification

• assessedvalueandotherrelatedassessmentinformation

Propertyownerscanreviewthevalueoftheirpropertyandcomparablepropertiestohelpdeterminewhethertheirproperty’sassessedvalueisinlinewithcurrentmarketvaluesandiftheirassessedvalueisequitable.ThisinformationisusefulifapropertyownerfilesaRequestforReconsiderationandmayalsoserveasthebasisforanAssessmentReviewBoardappeal.

RequestingPropertyInformationfromMPAC

TheownerofapropertyorapersonwhohasreceivedorisentitledtoreceiveaPropertyAssessmentNoticemayrequestinformationabouttheirproperty.

PersonslicensedbytheLawSocietyofUpperCanadatopracticelaw(lawyers)orprovidelegalservices(paralegals)mayrequestfactualinformationonbehalfofapropertyowner.ARepresentativeAuthorizationFormsignedbythepropertyownerisnotrequired.

AnindividualexemptfromlicensingbytheLawSocietyofUpperCanadamayrequestfactualinformationonbehalfofapropertyowner.Individualsexemptfromlicensinginclude:

• Anindividualactingforafamilymember,friendorneighbour.

• Anindividualactingforanon-profitorganization.

• Anindividualwhoisemployedbyasingleemployerandprovidesthelegalservicesonlyforthatemployerandtonopersonotherthantheemployer.

• Aconstituencyassistant.

ExemptindividualsactingonbehalfofthepropertyownermustsubmitaRepresentativeAuthorizationFormsignedbythepropertyownereverytaxationyear.

Inaddition,membersoftheHumanResourcesProfessionalsAssociationofOntariohavealimitedexemptionfromLawSocietylicensing,iftheyprovidelegalservicesonlyoccasionally,andancillarytothecarryingonoftheirprofessionoroccupation.Membersofthisorganizationarerequiredtoprovideamembershipnumberorsuitableidentifier.

AllrequestsforpropertyinformationfrompersonswhoarenotlicensedbytheLawSocietybutwishtorepresentapropertyownermust:

• Fullycomplete(everytaxationyear)MPAC’sstandardRepresentativeAuthorizationForm,or,

• ProvideMPACwithawrittenstatementsignedbytheowner,authorizedcompanysignatory,executorofanestate,personwithpowerofattorneyauthorization,etc.everytaxationyear.Ifthisisarequestfromacorporation,corporateletterheadmustbeused.

Allrequestsforpropertyinformationmustcontain:

• thepropertyassessmentrollnumber

• propertyaddress

• ownername(s)

• mailingaddress

• telephonenumber,faxnumber(ifapplicable),andemailaddress(ifapplicable)

Iftherequestisfromapropertyowner’srepresentative,therepresentative’sname,companyname(ifany),mailingaddress,phonenumber,faxnumberandemailaddressmustbeincludedintherequestletter.

NotetoRepresentatives:MPAC’sprovisionofinformationtoauthorizedrepresentativesshouldnotbeconstruedasanacknowledgementofanyrighttoactonbehalfofanypersonintheprovisionoflegalservicesasdefinedbytheLawSocietyAct(section1(6)).MPACwillonlyengageindiscussionwithrespecttoaRequestforReconsiderationoranassessmentappealwithpersonswhoarelicensedbytheLawSocietyorindividualswhoarespecificallyexemptedbytheLawSocietyasoutlinedabove.

Formoreinformationonlicensingandexemptionsfromlicensing,pleasevisittheLawSocietyofUpperCanadawebsiteatwww.lsuc.on.ca.

ForanonlinecopyoftheRepresentativeAuthorizationForm,clickhere.

AvailableReportsandInformation

AboutMyProperty™

MPAC’sAboutMyProperty™isasecurewebsitethatprovidespropertyownerswithassessmentinformationfortheirpropertyandsimilarpropertiesintheirarea.Throughthisself-serveapplication,propertyownerscanaccessbasicinformationsuchasyearofconstruction,squarefootage,sitearea,legaldescriptionandCurrentValueAssessmentonupto100properties.Propertyownerscanalsorequestadetailedreportthatincludesassessmentinformation,siteinformation,recentsalesinformationandstructuralinformationontheirownpropertyandupto24otherpropertiesoftheirchoice.Thisinformationisfreeofchargethroughaboutmyproperty.ca.

ForinformationrequestedthroughAboutMyProperty™thefollowingreportsareprovidedfreeofchargetopropertyownersforeachtaxationyear:

• One(1)PropertyProfileReportforeachproperty.

• Upto100PropertySnapshots.

• AFavouritesReportonuptotwenty-four(24)propertiesselectedbythepropertyowner.

Thefollowinginformationisalsoavailable:

• AMethodologyGuide–acomprehensiveguidethatexplainstheassessmentmethodologyusedtoassesstheproperty.

• AMarketValuationReport–Acomprehensivereportthatexplainshowassessmentmethodologywasappliedatasectorleveltovaluethepropertyforthe2016AssessmentUpdate.

IftherecordisnotdisplayedinAboutMyProperty™,propertyownersmayfollowtheoptionsbelowformakingawrittenrequesttoMPAC.

PropertyownerswithouthighspeedInternetaccessathomewishingtoaccessAboutMyProperty™mayvisitanyofMPAC’sfieldoffices,ServiceOntarioServiceCentresandparticipatingpubliclibraries.

WrittenRequestsforInformation

Thefollowinginformationisavailabletopropertytaxpayersfreeofchargeforeachtaxationyear:

• One(1)PropertyProfileReportfortheirproperty.

• AFavouritesReportonuptotwenty-four(24)propertiesofapropertytaxpayer’schoice.

AlsoavailablefreeofchargeuponrequestisaMethodologyGuideandaMarketValuationReport.Formoreinformationaboutthesereportsclickhere.

Informationfortenants

Uponrequest,atenantisentitledtoreceivetheinformationmaintainedbyMPACinrespectofaproperty,ortheportionofaproperty,leasedbythetenantandtoreceiveanyotherinformationabouttheproperty.

Tenantsofpropertiesvaluedontheincomeapproachcangainaccessto:

• Informationpertainingtothespacetheyoccupy.

• GrossLeasableAreaofthebuilding(commonareasandcorridorsarenotincluded).

• Totalassessedvalueoftheproperty.

• VacancyandExpenseAllowance.

• CapitalizationRateorGrossIncomeMultiplier(GIM)usedtovaluetheproperty.

• FairMarketRent.Intheinstancewherefairmarketrentsandactualrentsarethesame,thisinformationcannotbereleasedwithoutproperauthorizationbytheowner.

Asoutlinedinsection53.(4.1)oftheAssessmentAct,tenantsarenotentitledtoanyactualincomeandexpenseinformationfortheproperty.

Propertiesvaluedontheincomeapproachincludeshoppingcenters,officebuildings,commercial/industrialmallsandapartments.

GovernmentBodies

MPACprovidesavarietyofproductsandservices(includingthoserequiredorpermittedbylegislationorregulation)tomunicipal,provincialandfederalgovernmentsandtheiragencies.Dependingontheproductorservice,MPACmayormaynotchargeafee.

MunicipalitiesandThirdParties

Municipalitiesarestatutorypartiestoallassessmentappeals.Inaddition,otherpersonsmayfileappealsorbeaddedaspartiestoappealsbytheAssessmentReviewBoard(ARB).Theseotherpersonsarereferredtoas“thirdparties.”WhenrespondingtoRequestsforInformationfrommunicipalitiesandthirdparties,MPACstaffmustcomplywiththerequirementsoftheAssessmentAct,theMunicipalFreedomofInformationandProtectionofPrivacyActandtheMunicipalPropertyAssessmentCorporationAct.

Municipalitiesrequestinginformationaboutapropertytheyownhavethesameentitlementsasanyotherpropertyownerunderthispolicy.Theymayreceive:

• One(1)PropertyProfilereportandupto24comparableproperties–freeofcharge.

Municipalitiesandthirdpartiesrequestinginformationaboutpropertiestheydonotown,areentitledtoreceivethesamenumberofreportslistedabove,freeofcharge,onlywhentheinformationisrequiredforpreparationrelatedtoanappealproperlyfiledwiththeARBbythemunicipalityorathirdparty.Copiesofallinformationprovidedtomunicipalitiesandthirdpartiesunderthisprocessarealsoforwardedtotherespectivepropertyowner.

Uponrequest,municipalitiesandthirdpartieswhochoosetoparticipateinthepreliminaryproceedings,settlementnegotiationsandhearingswithrespecttoanassessmentappealare

providedallinformationlistedabove,freeofcharge,andonatimelybasis.Theexceptiontothisisanyactualincomeorexpensedata.

Whenarequestisnotrelatedtoanassessmentappeal,orwheretherequestexceedsthefreeentitlementslistedabove,afeewillbechargedfortheproducts.PleaserefertoMPAC’sProductCatalogueandPricing,forapplicablerates,atpropertyline.ca.Ifthepropertyisvaluedusingtheincomeapproach,andactualincomeandexpenseinformationisrequested,partiesmusteitherobtaintheconsentoftheowneroranorderfromtheARB.

IfyourequireanyadditionalinformationonhowtoaccesspropertyinformationfromMPAC,pleasecontactus.

GeneralValuationofProperty

Valuationsofpropertyarecarriedoutforavarietyofpurposes.ThelegislationgoverningtheassessmentofpropertiesforpropertytaxpurposesinOntarioissetoutabove.Itrequiresanassessmentofthe“currentvalue”ofallpropertiesasataspecificvaluationdate.

Thevaluationprocessfollowsanumberofsystematicstepsintendedtoensurethatallrelevantdataisobtainedandanalyzedbeforebeingusedintheprovisionofanestimateofthemarketvalueofthepropertyconcernedasattherelevantdate.

Inbroadterms,thevaluationprocessinvolvesthefollowingkeysteps:

• Ensuringaclearunderstandingofthepurposeforwhichthevaluationisbeingprovided.

• Researchingthelegalframeworkconcerningthevaluation.

• Identifyingthedateofthevaluation.

• Analyzingtherelevantmarket(international,regionaland/orlocaldependinguponthetypeofpropertytobevalued).

• Consideringthehighestandbestuseofthesubjectproperty.

• Obtainingpre-inspectiondataaboutthepropertytobevalued.

• Carryingoutasiteinspectionofthepropertytobevalued.

• Takingappropriatemeasurementsandrecordingdetailsofotherrelevantinformationwhileonsite.

©MunicipalPropertyAssessmentCorporation2017Allrightsreserved UpdatedMay2017 17

• Carryingoutaninspectionofanycomparablepropertiesthatmaybeofassistanceinascertainingthevalueofthesubjectproperty.

• Determiningtheappropriatemethod,ormethods,ofvaluationtobeused.

• Carryingoutthevaluation.

• Reviewingthevaluation.

• Finalizingandreportingthevaluation.

There are three common approaches to determining the current value of any property.

Approach How current value is determined Examples of property types

The income approach is normally used where the value of the property is de-pendent upon the income it can gen-erate. The income that is, or can be, generated from rents or other income in relation to the property being valued is converted into a capital sum (current value) by the use of a capitalization rate which is derived from analysis of actual sales in the market. MPAC use the “di-rect capitalization” method for the valua-tion of a variety of properties.

Hotel, Office Building, Shopping Centre, Golf Course

Cost Approach The cost approach is based upon the “principle of substitution,” which means that, if the direct sales comparison or income approaches are not appropriate, a prospective purchaser of a property would have regard to the cost of provid-ing a similar property to the one being valued in determining the current value of the property. The method is based upon estimating the cost of replacing the existing building, adjusting that cost to reflect any depreciation in the existing building, and adding the value of the land. MPAC’s experts have access to up to date, comprehensive building cost data to support this valuation approach.

Petro Chemical Manufacturing, Automotive Assembly Plants, Automotive Parts Manufacturing Mining, Aerospace Manufactur-ing, Food Manufacturing, Steel Manufacturing, Value Added Wood Products Manufacturing, Pharmaceutical Manufactur-ing, Paper Manufacturing, Pulp Manufacturing, Lumber Manufac-turing

Direct Sales Comparison Approach

This valuation method uses the sale prices of properties that have sold of a similar nature to develop market-driven price adjustments to value a subject property. MPAC experts analyze hun-dreds of sale prices within a given mar-ket area to develop price adjustments for physical and locational differences between properties to establish a current value estimate for all properties of a sim-ilar nature. Typically, adjustments to sale prices are required to recognize price differences due to building area, age, lot size, construction quality and location. Other adjustments are often required to recognize price differences due to other building and site related features.

Single family residence Condominium Vacant Land

Collection of Data from Property Owners

The primary goal of a mass appraisal process is to value many properties in a consistent andefficient manner. Mass appraisal is the process of valuing a group of properties as of a fixedvaluation date using common data and methods and allowing for statistical testing todetermine the overall quality of the value estimates. One way to achieve this efficiency is todevelop an approach that can be applied to a group of similar properties. This enables thecomparison of value from one property to another, and the establishment of value for eachproperty based on the typical outlook of the marketplace. This approach ensures that:

• All properties forming part of the group are valued.

• All similar properties are valued using a similar, defined uniform process that takes into account the typical perspective of the marketplace.

• Properties with characteristics that are dissimilar to those within the group are identified and valued using different parameters.

Therefore, the mass appraisal process begins with a study of all properties to be valued so that they can be classified into appropriate groups.

MPAC may request property specific information from property owners in advance of legislated assessment update deadlines, and upon or near completion of a renovation or construction of a new building.

The collection of data necessary for producing accurate values will vary slightly depending on the valuation approach, with information generally collected through the following sources:

IncomeApproachtoValuation

1. Existingassessmentrecords.

2. Completeaccesstothepropertyinordertoperformathoroughphysicalinspectionofboththeoutsideandinsideoftheproperty,inordertoobtainand/orverifytheaccuracyofthebuildingandsitecharacteristics,andtoidentifywhetherornotanychangeshavebeenmadesinceMPAC’slastvisit.

3. Rentroll.

4. Incomeandexpenseinformation.

5. Salesdata.

6. Industryrelatedpublications.

7. Corporatewebsite.

PropertyIncomeandExpenseReturnProgramResources

Theincomeapproachdeterminestheannualmarketrentalincomelessmarketvacancyandexpenseallowances.Thenacapitalizationrateisappliedtotheannualincometoarriveatacurrentvaluefortheproperty.

MPACusesaparticulartypeofincomeapproachknownasthedirectcapitalizationmethodofvaluation.Thismethodcapitalizes(converts)theexpectedlevelofcurrentfairmarketnetannualearningsintoanestimateofmarketvalueusingacapitalizationrate.

Fairmarketrentistherentthatthespacewouldmostprobablycommandifitwerevacantandavailableontheopenmarketasofaspecificdate.Estimatingmarketrentcanbedonebydirectcomparisontocurrentrentsnegotiatedforsimilarspaceortotheprevailingrentalrateinthemarketplaceforcomparablespaceleasedundersimilartermsandconditionsasofthevaluationdate.

Thecapitalizationrateisderivedfromanalysisofmarkettransactions-bothleasesandsales.

Aftercollectingthesalesdata,MPACgroupsthedataforanalysistoestablishthevariouscapitalizationratesandothermarketfactors.Thisdatawillbeusedtovaluecomparablepropertieswithinaspecificlocation.

MPACassignsthedataintoappropriategroupssothatcomparisonscanbemadebetweendifferentpropertiesforthepurposeofrankingandvaluingproperties.

Valuation

TheIncomeApproachtothevaluationhasthefollowingcomponents:

• DeterminethePotentialGrossIncome(PGI)–basedonmarketrentsandotherincomeasoftheeffectivedateofvaluation.

• AdjustthePGIforvacancytoarriveattheEffectiveGrossIncome(EGI).

• AdjusttheEGIfornon-recoverableexpensestoarriveattheNetOperatingIncome(NOI).

• ApplythecapitalizationratetotheNOItoarriveatthecurrentvalueoftheincome-producingproperty.

• Addforanyexcesslandorotherpartofthepropertynotincludedintheincome-producingpartoftheproperty.

PotentialGrossIncome

MPACusestheinformationithascollectedaboutactualnetrentspaidinthemarkettodeterminethePotentialGrossIncomeofgrossrentablespace.Althoughtheactualnetrentpaidisimportant,thevalueofthepropertywillreflectitsmarketincomeratherthantheactualincome.

Thepropertymayalsocontainretail,parkingandstoragerevenuesthereforethepotentialincomefromthesesourceshastobedetermined.

EffectiveGrossIncome

ItisnecessarytoadjustthePotentialGrossIncometotakeaccountofvacancies;propertieswilloftenlosesomeincomeoverthelifeoftheinvestmentduetovacancy,e.g.,betweentenantsmovingoutandothersmovingin.

MPACestablishesthenormalvacancyratebasedontheanalysisofinformationprovidedbypropertyowners.

ThisvacancyallowanceisusedtoadjustthePotentialGrossIncometoderiveanEffectiveGrossIncome.

NetOperatingIncome

ThenextstageinthevaluationprocessistoconverttheEffectiveGrossIncomeintoNetOperatingIncome(NOI).

MPACusestheinformationithasobtainedfrompropertyownerstoidentifynormalortypicaldeductionsthathavetobemadeformanagementandotheroperatingexpenses(e.g.,legalfees)thatcannotberecoveredfromtenantsbytheowner.

OncetheNOIhasbeenestablished,MPACproceedstothefinalvaluationstagebyapplyingtherelevantcapitalizationratetothatincome.

CapitalizationRate

MPAC'sanalysisofmarketsalesshowswhatcapitalizationratewasusedinthetransaction.

Thecapitalizationratewillvarydependinguponanumberoffactorsincludingthetypeandlocationanditsnetincome.

Theoverallcapitalizationrateofeachsaleisdeterminedbyusingthefollowingformula:

CapitalizationRate=NetOperatingIncomePropertyPurchasePrice

Capitalizationratesareadjustedfortimebyadjustingthesaleprice,i.e.,toreflectanydifferencebetweenthedateofsaleandthedateofvaluation.

Thecapitalizationrateappropriateforthepropertywilldependuponitsclassification/groupingandlocation.

CostApproachtoValuation

ThefollowingstepsaretakeninutilizingtheCostApproachtovaluation.

1. Aphysicalinspectionofthepropertytoobtainthecurrentphysicalstateandconditionoftheproperty.Theinspectionshouldconfirmandestablishallofthedetailsabouttheimprovements,theirconstruction,condition,anduse.Detailsshouldbeconfirmedandnotesmadeaboutthequalityandtypeofconstructionmaterialsusedforthefollowing:

• landscaping

• sitepreparation

• foundations

• framing

• walls

• floor

• ceilingstructure

• roofcovering

• plumbing

• lighting/electrical

• heating,ventilation,airconditioning(HVAC)

• doors

• elevators

• stairs

• firesystemsandsprinklers

• finishes

• paving

• railsiding

• yardimprovements

• otherassessableitems

• availabilityofmunicipalservices

2. Corporatewebsite.

3. Architecturalbuildingplans/drawings.

4. Interviewwithpropertyownerorfacilitymanager(whereappropriate)toevaluatewhetherornotexternalobsolescence,functionalobsolescence,fromexcesscapitalcosts,andfunctionalobsolescencefromexcessoperationcostsapply.Examplesofsomeoftheinformationthatwillberequestedduringtheinterviewinclude:

• Currentstaffingnumbers,i.e.,havetheyincreasedordecreased?

• Actualdesigncapacityvs.currentproduction(underoroverutilization).

• Arethereanyplansforfutureexpansion?

• Whodoyousupply/wheredoesyourproductgo?

• Maincompetitors.

• Howdoyoushipyourproduct?

• Howandwheredoyourrawmaterialscomefrom,i.e.,air,water,railorroad?

• Productioncapacityofsubjectproperty.

• Capacityutilizationofthepast12months.

• Totalrevenueforthepast12months.

• Anystructuraldeficienciesthataroseduringthepast12months.

• Outlookforthenext12months(i.e.,same,betterorworse)withabriefexplanation.

5. Breakdownofconstructioncosts.

ReplacementCost

MPACgenerallyusesthecostapproachtovaluelargeindustrialandspecialpurposeproperties.

Unlikemanyothertypesofproperty,largeindustrialandspecialpurposepropertiesarerarelysoldorleased.Theyareusuallybuiltbytheirownerstomeettheirparticularneeds.

Therefore,thereisofteninsufficientinformationtoapplythedirectsalescomparisonapproachortheincomeapproachtopredictvalue.

Forthesereasons,thecostapproachisadoptedinvaluinglargeindustrialandspecialpurposeproperties.

Theobjectiveofthecostingexerciseistodeterminethedepreciatedreplacementcostoftheimprovements.Areplacementbuildingreflectswhatactuallywouldbebuiltifthebuildingandotherstructuresweretoberebuilt.

Replacementsarethereforedesignedtoreplacetheexistingfunctionsandcapacityoftheproperty.Thereplacementreflectsadvancesintechnologyandinthedesign,layout,andconstructionoftheimprovements.Replacementcostthereforetakesintoaccountmanyoftheelementsthatgiverisetothefunctionalobsolescenceinherentinaproperty.

DeterminingReplacementCost

Thecostnewofapropertyisnormallyarrivedatbymeasuringandquantifyingtheexistingimprovements,andthendeterminingthecostofreplicatingthequality,quantity,andlayoutofthesestructuresbasedoninformationcontainedinareputablestandardcostmanual.

MPAChasaccesstoavarietyofwidelyrecognizedcostmanualsalongwithotherbuildingcostdatacollectedduringthecourseoftheiractivities.

AutomatedCostSystem

MPAChasdevelopedasystemcalledtheAutomatedCostSystem(ACS)forusewhenapropertyisbeingvaluedbythecostapproach.

TheACSensuresthataconsistentapproachisusedbyMPACwhenvaluingpropertiesusingthecostapproach.

TheACScontainsdatawhichreflectsthecostoflabour,equipmentandmaterialsforeachstructuralelementofanimprovement;italsoreflectsdepreciationresultingfromtheeffectiveageofthebuildingsorstructures.

CostOptions

Whenconsideringreplacementcost,MPAChasthreechoices:

1. Replicationoftheexistingimprovementsincludingthelayout,quantityandmaterialsfoundattheactualproperty.

2. Replicationofexistingimprovementsincludingthelayoutandquantitybutreplacingthematerialsandconstructiontechniqueswithmoremodernsubstitutes.

3. Replacingorsubstitutingtheexistingimprovementswithafacilityofmoderndesign,quantity,andlayout.

Depreciation

Thedifferencebetweenthecostofanewbuildingandtheamountthemarketwouldpayforanexistingpropertyisthedepreciationinherentintheproperty.

Depreciationcanbequitecomplexandadjustmentstoreplacementcosttoaccuratelyreflectdepreciationrequiresknowledge,analysisandjudgment.

MPAChasexpertswhohavemanyyearsofexperienceinmakingthesejudgments.MPAC'sACSsystemincorporatesadjustmentsforeffectiveage-relateddepreciation.

ApplyingtheCostApproach

Therearetwoprincipletasksinestimatingmarketvalueusingthecostapproach:

• valuingtheland

• valuingtheimprovements(i.e.,thebuildingsandstructures)

ValuingtheLand

Thelandisvaluedasifitwasvacant;itscurrentvalueisestablishedthroughanalysisofcomparablemarketsalesdata.

MPACcollectsinformationaboutthesaleoflandforallindustrialand/orspecialpurposepropertiesandanalyzesthisdatasoitcanbeusedforapplicationofvalue.

ValuingtheImprovements

MPACinspectsthepropertytocollectphysicalanddescriptivedataaboutthelandandbuildings(age,size,use,etc.).

MPACthencarriesoutacostingexercise(usingitsACS)todeterminethereplacementcostoftheassessablebuildingsandstructures.

MPACthendeductsfromthisreplacementcost"asifnew,"anappropriateage/conditionrelatedallowancebasedupontheeffectivechronologicalandconditionrelatedageofthestructureorbuildingasofthebaseyearassessment.

MPACthenadjuststhedepreciatedreplacementcosttoreflectvariousformsoffunctional,aswellasexternalobsolescence.

Obsolescence

Adjustmentsmayhavetobemadeinthevaluationtoreflectdepreciationduetotheageorconditionofthebuilding.

However,furtheradjustmentsmayneedtobemadefor:

• Functionalobsolescence–thismaybeduetoareductionintheutilityoftheproperty;e.g.,theexistinglayoutofthebuildingmaynotbeasefficientasamodernreplacement.

• Externalobsolescence–thismaybeduetofactorsnotdirectlyrelatedtotheproperty;e.g.,changesinthemarket.

MPACusesamethodcalledallocationofmarket-extracteddepreciationtodeterminetheadjustmentthatmaybenecessaryforexternalobsolescence.

MPACexpertsanalyzeallsalestodeterminethefollowingatthetimeofsale:landvalue,costnew,physicaldeteriorationandfunctionalobsolescence.

Theoutcomeofthisanalysisiscomparedtothesaleprice(assessmenttosaleratio)toidentifyanyexternalobsolescence.UsingthismethodMPACexpertsareabletousemarketevidencetoadjustforanyexternalobsolescenceinpreparingtheirassessedvalues.

Havingmadeallappropriateadjustmentstothereplacementcostfordepreciationandobsolescence,theresultingvaluewillbeanestimateofthecontributionoftheimprovementstothemarketvalueofthesubject,depreciatedforallcauses.

AsummaryofthestepstakenbyMPACfollows:

1. Identifyallpropertiesthatsold.

2. ForeachofthesoldpropertiesMPACdetermines:

• thelandvalueattimeofsale

• thecostnewattimeofsale

• thephysicaldeteriorationattimeofsale

• the functional obsolescence at time of sale

3. Calculate the cost new, less physical deterioration and functional obsolescence, plus land value for each of the sold properties.

A ratio study is completed whereby the preliminary assessed values are compared to the sale amounts to varify the presence of external obsolescence.

If the resultant assessment to sale ratio (ASR) is greater than 1.00 it indicates that there is external obsolescence.

A factor is applied to the preliminary assessed values to bring the ASR closer to 1.00 causing the cost approach to indicate values that reflect the actions of market participants.

A very basic example for similarly improved properties follows:

Line No Formula Comp 1 Comp 2 Comp 3 Comp 4

1 Sale Price $1,000,000 $900,000 $1,400,000 $830,000

2 Cost New $1,600,000 $1,350,000 $2,000,000 $1,750,000

3 Physical Deteriora-tion

$350,000 $275,000 $425,000 $650,000

4 Functional Obsoles-cence

$100,000 $0 $225,000 $150,000

5 Land Value

$300,000 $150,000 $400,000 $175,000

6 Prelimi-nary Value

Line 2 - Line 3 - Line 4+ Line 5

$1,450,000 $1,225,000 $1,750,000 $1,125,000

7 ASR Line 6 / Line 1

1.45 1.36 1.25 1.35

A factor is required to adjust the preliminary values to values much closer to current value. Onthe assumption that the cost new, physical deterioration, functional obsolescence, and landvalue are correct the factor is entirely attributable to external obsolescence.

Application of the factor to the example results in the following:

Line No Formula Comp 1 Comp 2 Comp 3 Comp 4

1 Sale Price $1,000,000 $900,000 $1,400,000 $830,000

2 Land Value

$300,000 $150,000 $400,000 $175,000

3 Market Improve-ment Resid-ual

Line 1 - Line 2 $700,000 $750,000 $1,000,000 $655,000

4 Depreciat-ed Improve-ment Value*

See footnote 1 $1,150,000 $1,075,000 $1,350,000 $950,000

5 Indicated External Obsoles-cence

Line 4 / Line 3 1.64 1.43 1.35 1.45

6 Median Indicated

1.44 1.44 1.44 1.44

*The depreciated improvement value is the result of subtracting the physical deterioration and functional obsolescence allotments from the cost new estimate. Reference should be made to preceding table.

The indicated median of 1.44 is converted into a factor to calculate the allotment for external obsolescence. The factor is the result of the following formula:

[1-(1.00/1.44)]=.305

The factor of .305 is applied to the depreciated improvement value only; the land value is not adjusted.

Final ValueThe sum of the land value plus the depreciated improvement value becomes the assessed value.

DirectSalesComparisonApproachtoValuation

1. Aphysicalinspectionofthepropertytoobtainthecurrentphysicalstateandconditionoftheproperty.

2. Buildingpermits.

3. Architecturalbuildingplans/drawings.

4. Salesdata.

MPACusesthedirectsalescomparisonapproachasitsmethodofvaluingmostpropertiesinOntario.Althoughthisapproachismostlyappliedtoresidentialproperties,wherethereisahigherfrequencyofopenmarketsalestransactions,smallcommercialandindustrialpropertiesarealsovaluedusingthesalescomparisonapproach.Thisapproachtovalueisbasedonthetheorythatthecurrentvalueofapropertyisdirectlyrelatedtothesalepricesofsimilarproperties.

Thesalescomparisonapproachtovalueestimatesthecurrentvalueofasubjectpropertybyadjustingthesalepricesofcomparablepropertiesfordifferencesbetweenthecomparablepropertiesandthesubjectproperty.

MPACisabletodetermineaccuratevaluesforlargegroupsofpropertiesbasedoncommondataandmassappraisaltechniques.Inadditiontorecentsales,MPAClooksatthekeyfeaturesofeveryproperty.Thereare,however,fivemajorfactorsthataccountfor85%ofthevalue:

1. location

2. lotdimensions

3. livingarea

4. ageoftheproperty,adjustedforanymajorrenovationsoradditions

5. qualityofconstruction

MPACreceivesalllandtitledocumentsregisteredatthe54LandRegistryOfficesacrossOntario.

Thesedocumentscontaininformationsuchastheowner’sname,mailingaddress,legaldescription,saleamount,andsaledate,whichisenteredinMPAC’sdatabase.

Notallsalestransactionsareconsideredtobearm’slengthtransactionsorrepresentativeofthemarket.OnlythosesalesthatareconsideredtorepresentvalidopenmarketsalesareincludedinMPAC’sanalysis.Thekeyelementsofavalidsaleare:

• Itisanarm’slengthtransactionintheopenmarket.

• Thepropertyhadareasonableperiodoftimeforexposuretothemarket.

• Thesaleamountisexpressedintermsofmoney.

Examplesofinvalidsalesare:

• Transactionsbetweenfamilymembersorbetweenaparentcompanyanditssubsidiary.

• Quitclaims(i.e.,adeedisregisteredtocorrectadiscrepancyontitle).

• Forcedsales(e.g.,bankruptcyofvendor).

• Speculativesales(e.g.,purchasedforananticipatingfutureuseoftheproperty).

• Salesbythegovernmentorsomeotherorganizationthatisexemptfrompayingpropertytaxes.

• Salesbasedonnon-typicalfinancing.

• Salesthatrepresentonlyapartialinterestintheproperty.

• Agreementsofpurchaseandsale,wherethesalepriceisnegotiatedandagreedto,muchearlierthanthecloseofthesale.

Todeterminewhetherasaleisvalid,MPACwillconductasalesreviewandcompleteoneormoreofthefollowingactivities:

• Apropertyinspection.

• Mailingordeliveringasalesquestionnairetothenewowner.

• Telephoningthevendor,thepurchaser,and/orrealestateagent.

• Areviewofotherrealestateinformationsources.

WhenMPACinspectsapropertyaspartofasalesreview,MPACstaffwillinspectthelandandallbuildings.Thepurposeoftheinspectionistoverifythatallofthelandandbuilding

characteristicsrecordedonMPAC’sdatabaseareanaccuratereflectionofthepropertyat-time-of-sale.MPACstaffwillalsoidentifywhetheranychangeshavebeenmade,eitherbeforeorafterthesale,thatneedtobereflectedintheassessedvalueoftheproperty.

Inmassappraisal,thesalescomparisonapproachisappliedbydevelopingapropertyvaluationmodelthatdevelopsestimatesofvalue,basedonphysicalandlocationcharacteristicssuchasbuildingarea,age,lotdimensions,andimmediateneighbourhood.

Allvalueadjustmentsarederiveddirectlyfromthelocalmarketplace.Amass-appraisalprocessresultsinestimatesofvaluethatareaccurateincomparisontoactualsalesinthelocalmarket,anduniformincomparisontosimilarproperties.

Section19.2(1)oftheAssessmentActrequiresthatMPACproduceestimatesofvalueasofalegislatedvaluationdate.ThisrequiresMPACtoadjustsalepricestothelegislatedvaluationdatetoreflectanymarketchangeovertime.

PropertyValuationModelBuilding

EachpropertyinOntarioisassignedtoamarketarea,locationalneighbourhoodandsub-neighbourhoodforvaluationpurposes.

Marketareasaregeographicareassubjecttothesameeconomicinfluences.Propertiesinamarketareatendtomoveupordowntogetherinvalueandwillbeincompetitionwithoneanotherinthemarketplace.Theyareusually,butneednotbegeographicallycontiguous.Salesfromeachmarketareaareanalyzedtodevelopapropertyvaluationmodeltovalueallpropertieswithinthatmarketarea.

ModelSpecification

Modelspecificationisthefirststepinthevaluationworkinamassappraisalprocess.Itdeterminesthedatatoincludeinthepropertyvaluationmodel,andinwhatformat.Themodelshouldincludeallpropertycharacteristicsthatinfluencevalueinthelocalmarketplace.

Inmostcases,85percentofaproperty’svaluecanbeattributedtolocation,age,constructionquality,buildingarea,andlotdimensions.Theremaining15percentcanbeattributedtofeaturesthatmayaffectthevalueeitherpositivelyornegatively,e.g.,apropertylocatednexttoagolfcourseorapropertylocatedonamajorthoroughfare.

Onepropertyvaluationmodelisspecifiedforeachmarketarea.InComputerAssistedMassAppraisal,themostcommontypeofmodelusedtovaluepropertiesisanadditiveMultipleRegressionAnalysismodel.Withthistypeofmodel,abasevalueisdeveloped,andthe

propertyvaluationmodelwilladdorsubtractvaluebasedontheadjustmentswithinthemodelandthepropertycharacteristicsonfileforyourproperty.

AsamplespecifiedadditiveMultipleRegressionAnalysismodelisasfollows:

CV=BaseValue+b1*BuildingArea–b2*Age+b3*LotSize+b4*NBHD2+b5*NBHD3.

ModelCalibration

Modelcalibrationisthedevelopmentoftheadjustmentsfromthesalescomparisonanalysisofthepropertycharacteristicstobeusedinthepropertyvaluationmodel.

AsamplecalibratedadditiveMultipleRegressionAnalysismodelusingthespecifiedmodelfromaboveis:

CV=$125,400+$48.00*BuildingArea-$1,600*Age+$1.00*LotSize-$4,800*NBHD2+$3,000*NBHD3.

Whilethegeneralvalueinfluencesareconsistentacrosseachmarkettypeandarea,theirrelativeimportancewillvarybetweenmarkets.

DirectSalesComparisonApproachModelTesting

Onceeachmodelisdeveloped,itistestedtoensureitproducesvaluesthatareaccurate,consistentandfair.Thesetestsarecompletedusingindustrystandardsalesratiostudies.

Forexample,valuesaretestedtoensureolderandnewerbuildingsareassessedatthesamelevelofassessment(i.e.,themodelisnotundervaluingnewerpropertiesandovervaluingolderproperties).Theratiostudyiscompletedforallmajorvaluecontributors(i.e.,buildingarea,constructionquality,age,lotdimensions,andlocation)priortotheapplicationofthemodeltoallpropertieswithinthemarketarea.Ifthemodelisfoundtoproduceinaccurateinitialestimatesofvalueforagivenpropertycharacteristicorneighbourhood,theproblemmaybecorrectedbyre-specifyingandre-calibratingthemodeloranadjustmentmaybedevelopedbasedontheresultsofthesalesratiostudy.

Fine-TuningofValues

Individualvaluesdevelopedusingthesalescomparisonapproacharereviewedforreasonablenessandconsistencywithrecentsales,eitherofthesubjectpropertyitself,orofsimilarpropertiesinthesamearea.

Insituationswheretheestimateofcurrentvalueappearstobeunreasonableorinconsistent,thevaluesareadjusted.

Thepurposeofthisreviewistoreconciletheinitialestimatesofvaluetoensurethatafairandequitableassessmenthasbeenplacedoneachproperty.Uniquesituationswillexistwhereindividualpropertiesmayrequirefurtheradjustmentstoachievecurrentvalue.

Uponcompletionoftheindividualvaluereviewprocess,theestimatesofvalueproducedbythesalescomparisonapproachtovaluethroughthemassappraisalprocessareconsideredfitforuseasCurrentValueAssessments.

CollectionofDatafromMunicipalities

Municipalitiescollectintegralpropertyinformationfrompropertyowners,andcreatepolicythatcansignificantlyinfluenceCurrentValueAssessments(CVA).TheinformationnecessaryformunicipalitiestosharewithMPAC,forproducingaccurateCVAs,isasfollows:

• Allnewbuildingpermitsdetails,includingallstatusupdatesthroughouttheconstructionprocess.

• Approvedsetofarchitecturalbuildingplans/drawings.

• Currentzoning,includingsecondaryplaninformation,andallupdatesastheyoccur.

ThesedatarequirementsarebeingrequestedbyMPACinorderto:

• IdentifynewconstructionorrenovationsthatmaycontributetoCVAchanges.

• Workloadmanagementandprioritizationofbuildingpermitrelatedactivities.

• Enablesprocessefficienciesleadingtotimelierassessmentdelivery.

• AccuratelyreflectcurrentlandusepoliciesindeterminingCVAandclassificationofland;and,forestablishingtheexistenceandvalueofexcessland.

FormatforDeliveryofMunicipalData

• WebServices.

• Standardizeformat–electronic.

• GISParcelfabric.

• Accessibilitytopaperdocuments,intheabsenceoftheabove.Itisworthnoting,however,thatpaperexchangerequiresgreaterprocessingeffort,leadingtodelaysinproductdeliverables.

MPACProductsandServicesLinkWebServices

WebservicesaresoftwaresystemsdesignedtoenabledirectelectronicdatatransferovertheInternetbetweentwocomputersusingXMLcoding.

Municipalitiesareabletousetheseservicestoefficientlysubmitandextractinformationsuchaspropertydetails,buildingpermits,inspections,andmuchmore.

AdditionaldetailsandinstructionsregardingtheinitiationofanyoneoftheaboveinformationexchangeinitiativescanbearrangedwithMPAC’sMunicipalandStakeholderRelationsdepartment.

AppendixA–GlossaryofTerms

ThesedefinitionsarefromavarietyofsourcesincludingPropertyAppraisalandAssessmentAdministration,JosephEckert,ed.IAAOandTheAppraisalofRealEstate,AppraisalInstitute,12thEdition.

Accrueddepreciation

Theamountofdepreciationfromanyandallsourcesthataffectsthevalueofthepropertyinquestion.

ActualAge Sometimescalled“historicalage”or“chronologicalage”.Itisthenumberofyearsthathaselapsedsincebuildingconstructionwascompleted.

Age/lifemethod Amethodofestimatingaccrueddepreciationfoundedonthepremisethat,intheaggregate,aneatmathematicalfunctioncanbeusedtoinferaccrueddepreciationfromtheageofapropertyanditseconomiclife.

Approachestovalue

Oneormoreofthreeapproachestovalue,namely(a)cost(b)salescomparison(c)incomecapitalization.Theapproachesemployedwillallowtheassessortodeterminethevalueoftheproperty.

Assessmentequity Thedegreetowhichassessmentsbearaconsistentrelationshiptomarketvalue.

Assessedvalue Assessedvalueappliesinadvaloremtaxationandreferstothevalueofthepropertyaccordingtothetaxrolls.

Breakdownmethod

Amethodforestimatingtotaldepreciationbyspecifyingtheamountofeachkindofdepreciation,oftenforeachmajorbuildingcomponent,(includingphysical,functionalandexternal).

Chronologicalage Thenumberofyearselapsedsinceanoriginalstructurewasbuilt.Synonymousareactualageandhistoricalage.Contrastwitheffectiveage.

Comparables,ComparableSales

Recentlysoldpropertiesthataresimilarinimportantrespectstoapropertybeingappraised.Thesalepriceandthephysical,functional,andlocationalcharacteristicsofeachofthepropertiesarecomparedtothepropertybeingappraisedinordertoarriveatanestimateofvalue.Byextension,thetermcomparablesissometimesusedtorefertopropertieswithrentorincomepatternscomparabletothepropertybeingappraised.

Cost Thetotaldollarexpenditureforanimprovement(structure).

CostApproach Valueasestimatedasthecurrentcostofreproducingorreplacingtheimprovements(includingtheappropriateentrepreneurialincentiveorprofit)minusthelossinvaluefromdepreciation,pluslandorsitevalue.

Currentvalueassessment(CVA)

AsdefinedintheAssessmentActSection1:Currentvaluemeans,inrelationtoland,theamountofmoneythefeesimple,ifunencumbered,wouldrealizeifsoldatarm’slengthbyawillingsellertoawillingbuyer.

Deferredmaintenance

Repairsandsimilarimprovementsthatnormallywouldhavebeenmadetoapropertybutwerenotmadetothepropertyinquestion,thusincreasingtheamountofitsdepreciation.

Depreciation Thelossinvalueofanobject,relativetoitsreplacementcost,reproductioncost,ororiginalcostwhateverthecauseofthelossinvalue.Depreciationissometimessubdividedintothreetypes:physicaldeterioration(wearandtear),functionalobsolescence(sub-optimaldesigninlightofcurrenttechnologiesortastes),andeconomicobsolescence(poorlocationorradicallydiminisheddemandfortheproduct).

Economiclife Theperiodoftimeduringwhichagivenbuildingorotherimprovementtoapropertyisexpectedtocontribute(positively)tothevalueofthetotalproperty.Thisperiodistypicallyshorterthantheperiodduringwhichtheimprovementcouldbeleftonthe

property,thatis,itsphysicallife.

Economic/Externalobsolescence

Lossinvaluetotheimprovements(relativetothecostofreplacingtheimprovementswithoneofequalutility)thatstemsfromfactorsexternaltotheproperty.

Effectiveage Thetypicalageofastructureequivalenttotheoneinquestionwithrespecttoitsutilityandcondition.Knowingtheeffectiveageofanoldrehabilitatedstructureofabuildingwithsubstantialdeferredmaintenanceisgenerallymoreinformativethanknowingitschronologicalage.

Equity (1)Thedegreetowhichassessmentsbearaconstantrelationshiptomarketvalue.Measuresincludethecoefficientofdispersionandthecoefficientofvariation.(2)Thenetvalueofapropertyafterliensandotherchargeshavebeensubtracted.Seealsohorizontalinequityandverticalinequity.

Fixedcosts Costsoffixedresourcesusedbyafirmthatdonotvarywithproductionlevelsandcannotbechangedintheshortrun.

Functionalobsolescence

Aflawinthestructure,materialsordesignthatdiminishesthefunction,utilityandvalueoftheimprovement.

Functionalutility Theabilityofthepropertyorbuildingtobeusefulandtoperformthefunctionforwhichitisintendedaccordingtocurrentmarkettastesandstandards,theefficiencyofbuilding’suseintermsofarchitecturalstyle,designandlayout,trafficpatternsandsizeandtypeofbuildings.

HighestandBestUse

Thereasonablyprobableandlegaluseofvacantlandonimprovedpropertythatisphysicallypossible,appropriatelysupported,andfinanciallyfeasiblethatresultsinthehighestvalue.

Long-liveditems Buildingcomponentswithanexpectedremainingeconomiclifethatisthesameastheremainingeconomiclifeoftheentirestructure.

Marginalutility Thechangeintotalutilitytoacustomerthatresultsfromaone-unitchangeintheconsumptionlevelofanitem.

Marketextractionmethod

Methodofestimatingdepreciationwhichreliesontheavailabilityofcomparablesalesfromwhichdepreciationcanbeextracted.

Marketvalue Themostprobablesalepriceofapropertyintermsofmoneyinacompetitiveandopenmarket,assumingthatthebuyerandsellerareactingprudentlyandknowledgeably,allowingsufficienttimeforthesale,andassumingthatthetransactionisnotaffectedbyunduepressures.SeeCurrentValueAssessment

Obsolescence Onecauseofdepreciation,animpairmentofdesirabilityandusefulnesscausedbynewinventions,changesindesign,improvedprocessesforproductionorexternalfactorsthatmakeapropertylessdesirableandvaluableforcontinuinguse.Itmaybeeitherfunctionalorexternal.

Remainingeconomiclife

Thenumberofyearsremainingintheeconomiclifeofabuildingorotherimprovementasofthedateoftheappraisal.Thisperiodisinfluencedbytheattitudesofmarketparticipantsandbymarketreactionstocompetitivepropertiesonthemarket.

Replacementcost Thecost,includingmaterial,labour,andoverhead,thatwouldbeincurredinconstructinganimprovementhavingthesameutilitytoitsownerastheimprovementinquestion,withoutnecessarilyreproducinganyparticularcharacteristicoftheproperty.

Reproductioncosts

Thecost,includingmaterial,labor,andoverhead,thatwouldbeincurredinconstructinganimprovementhavingexactlythesamecharacteristicsastheimprovementsinquestion.

Short-liveditems Abuildingcomponentwithanexpectedremainingeconomiclifethatisshorterthantheremainingeconomiclifeoftheentirestructure.

Specialpurposeproperty

Alimitedmarketpropertywithauniquephysicaldesign,specialconstructionmaterials,oralayoutthatrestrictsitutilitytotheuseforwhichitwasbuilt,alsocalledspecialdesignproperty.

Information Data Sharing Policy May 2017 · to subsection 10(1) of the Municipal Property...

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